##{"id":60568,"date":"2012-09-13T10:11:39","date_gmt":"2012-09-13T00:11:39","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/09\/13\/rudis-response-jb-hi-fi-is-a-maturing-business\/"},"modified":"2012-09-13T10:11:39","modified_gmt":"2012-09-13T00:11:39","slug":"rudis-response-jb-hi-fi-is-a-maturing-business","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/09\/13\/rudis-response-jb-hi-fi-is-a-maturing-business\/","title":{"rendered":"Rudi’s Response: JB Hi-Fi Is A Maturing Business"},"content":{"rendered":"

\n\tEvery so now and then FNArena<\/span> receives a question that is worthwhile sharing with a broader audience. This week's question from subscriber John from Altona<\/span> Meadows, Victoria about JB<\/span> Hi-Fi<\/span> ((JBH<\/span>)) qualifies in our view.<\/p>\n

\tQuestion:<\/strong><\/p>\n

\tHi,<\/p>\n

\n\tI know you are not an advisor as such, but i would love a little information about JB<\/span> Hi-Fi<\/span>.<\/p>\n

\tI purchased them around $2.00 and they did go up to 20+ dollars.. they have now gone down to under $9.00 and i have been reluctant to sell. I did get rid of some shares a few months back at $12.00, and am trying to figure out whether to get rid of the lot.<\/p>\n

\tI am hearing about takeover rumours<\/span> etc and that they are still a good company etc, but I have to admit I am getting a little worried.<\/p>\n

\tThanks in advance….<\/p>\n

\tJohn<\/p>\n

\tResponse from the FNArena<\/span> Editor:<\/strong><\/p>\n

\tJohn,<\/p>\n

\tMaybe I should write this down in a Weekly Insights one day…<\/p>\n

\tWhat many investors don't understand is that retailers such as JB<\/span> Hi-Fi<\/span> go through a growth cycle. At first they have a few stores only and growth becomes abundant as new stores are being opened in leverage of a successful business model.<\/p>\n

\tAt some point, however, the business reaches a certain level of maturity and this is where all bad things start happening; lower growth, de-rating, share price falls.<\/p>\n

\tAt this point in time, JB<\/span> Hi-Fi<\/span> shares are not expensively priced, as you can see in Stock Analysis. But our consensus data also show the company is effectively ex-growth.<\/p>\n

\tAt least, as far as the analysts are concerned.<\/p>\n

\tThis means the potential for further upside is not very large and those high dividends may well become the maximum achievable.<\/p>\n

\tWhat could change this picture? Maybe a successful launch of the iPhone 5 can temporarily attract more buyers and sales in stores? But then we recently published a review that suggested selling more Apple products is not beneficial for retailers in Australia as it effectively depresses margins.<\/p>\n

\tWith retail spending to remain moderate, especially in the market segment of consumer electronics, I don't think your expectations regarding JB<\/span> Hi-Fi<\/span> should be too high.<\/p>\n

\tToo many investors look over their shoulder and reminisce about how well those good times have been for the share price. They shouldn't. JB<\/span> Hi-Fi<\/span> is not just a story of a changing landscape for consumer spending in Australia, it is equally about a retail business model that has matured.<\/p>\n

\tWatch cash flow statements to get an idea about how secure those dividend payouts are, and whether they will remain secure.<\/p>\n

\tI hope this answers your question.<\/p>\n

\tCheers<\/p>\n

\tRudi Filapek-Vandyck<\/span>
\n\tYour Editor<\/p>\n

\n\t(Do note that, in line with all my analyses<\/span>, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions.) <\/strong> <\/span><\/p>\n

\n\tP.S. I – All paying members at FNArena<\/span> are being reminded they can set an email alert for my Rudi's View stories (this includes the occasional Rudi's Response stories). Go to Portfolio and Alerts in the Cockpit and tick the box in front of 'Rudi's View'. You will receive an email alert every time a new Rudi's View story has been published on the website. <\/span><\/p>\n

\n\t <\/p>\n

\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n

\n\t <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"